how to save for your child’s education

As parents, we welcome the arrival of our little ones with joy and wonder. When they are little, our hope is for them to be healthy and strong. We want them to form strong friendships, and live happy lives. As they get older and grow into young men and women, we wonder how we will be able to provide an education for them. It is possible to save for our children’s education. Even if the amount that we save is not enough to pay for the entire four years of university, it is a start. The important thing is that we would have given them a hand in realizing their goals. Let’s look at some ways to save for our children’s education.

Start small

We do not need to wait until our children reach high school to start saving for their education. Start setting aside small amounts when they are young. What do I mean? When your child is born, in the first year of life put aside a small amount towards their education. Depending on your currency, the small amount will vary. We’ll use Jamaican currency as an example. If you have a 1-year-old – start by putting aside $400-$500 per month. If you are in Canada start with $10 or $20. You may wonder what will this do? It certainly cannot pay for their education. However, think of it this way, by starting small and saving consistently you will see your savings grow. It will multiply.

Increase the amount

Over time, you will want to increase the amount that you are putting aside for your children’s education. Think about it like this, you are never in the same position, getting the same pay as when they were born. As you come into more money, increase the amount that you set aside for education.

Choose the savings vehicle

Now that you have a start, what should you do with those funds? You can look into using a Unit Trust so that your savings will accelerate. A Unit Trust is an instrument that is offered by banks and other financial institutions. The Unit Trust is a pooled investment. Your money is lumped with other people’s money and the financial institution invests this money on behalf of the group. Some ways that the money is invested is by buying stocks or shares in a company. By yourself, the $400 or $500 may not be able to buy the minimum number of shares, but when it is pooled with other investors, it can buy the required number of shares.

Make it Automatic

Once you have decided on an investment vehicle, make your savings automatic. This means going to your payroll department and completing a form that says X amount should be taken out of your pay each pay cycle and sent to the financial institution.
In the Canadian environment, there is a financial vehicle called RESP – Registered Education Savings Plan. In this plan, your $10 or $20 is saved and the government gives a grant on this amount per child. The longer the money remains, and the earlier you start saving, the more interest you will be able to accumulate.

Power of Compounding

Over time the amount of money increases due to the power of compounding. Albert Einstein called “Compounding interest the eighth wonder of the world. He who understands it …earns it, he who doesn’t ..pays it.” Compounding allows your money to grow because of the interest that your money earns. For instance, if you save $100 in January, and you are paid 5% interest every six (6) months, in June you will be paid interest on the $100 + 5% interest. This continues for the entire time that you have the money in your account. Two times each year, you will get interest on the money that you have accumulated. So, over time, your money will multiply as your interest grows.

Think Long Term

We all know the saying popular saying; “Rome was not built in a day”. All progress takes time. Therefore, it will take time for your goals to be realized. However, using some of the tips that we discussed will allow you to bring your dreams to fruition. It is important to make goals, start small and think long term. Life will take you along many turns and if you are not careful, your dreams can get derailed. What would it be for your kids to be able to realize their dreams because you laid the foundation? Think about the sense of pride and achievement that you will feel when your children achieve their dreams.

Conclusion

In summary, creating great dreams and achieving them, takes intention and insight. Ensuring that we provide for our children goes beyond food, shelter, and clothing. In this new digital knowledge economy, it is the person who takes the time to prepare and go after their dreams who will be rewarded. I think that most parents would agree that there is no greater reward than realizing that your children have a better chance at life, armed with the skills that they are able to learn, because you provided the resources. Learn more about setting Smart Goals.

*Stock image provided by Pixabay.